Global business confidence in the Middle East has improved for the second consecutive quarter, despite economic growth in the region being at a 30-year low, according to a new report.

However, the regional confidence levels remain low amid slumping growth rates with 44 per cent of businesses report worsening conditions, said the Q3 2016 Global Economic Conditions Survey (GECS) from ACCA (Association of Chartered Certified Accountants) and IMA (Institute of Management Accountants).

It found that global confidence is at a 12-month high, boosted by increased prospects of government spending and recoveries in China and North America.

The survey covered 1,512 finance professionals and more than 150 chief financial officers around the world.
 
Lindsay Degouve de Nuncques, head of ACCA Middle East, said business confidence in the Middle East has improved as firms and governments adjust to falling oil prices.

“The confidence survey highlights that falling state spending and business investment since the fall in oil prices continues to offer a downbeat outlook for many firms in the Middle East, although many are feeling optimistic that they are over the worst.

“Despite the improvements we have seen, ultimately regional business confidence is the lowest anywhere outside Africa or the Caribbean, with 44 per cent reporting worsening conditions.”

De Nuncques does think, however, that UAE is in a stronger position than many other regional economies.

‘The UAE is starting to reap some of the benefits after some tight fiscal measures following the oil price slump. The budget is now in surplus, which means that businesses are feeling more confident that investment may no longer continue to fall and may even start to improve soon.

“Ultimately the strength of the UAE is a diversified economy where the robust performance of the logistics and tourism sectors are able to compensate the oil price fluctuations.”

De Nuncques notes that while the biggest concern for the Middle East remains oil prices rather than political shocks such as the UK’s Brexit vote, the US elections in November could have a more global impact.

“Despite fears that Brexit could unsettle the global markets, so far this has not been the case. Brexit is definitely a European, rather than global concern: the UK represents only 4 per cent of global trade GDP. Nearly 60 per cent of global respondents said that they had not been affected by the vote.

“Yet, given the uncertainty surrounding the US elections in November, where protectionist sentiments have been unusually pronounced, the outcome and response of the new President will be significant for the future prospects of global free trade.”

Despite improvements in confidence, the world is yet to see it translate into a meaningful boost to hiring and investment. De Nuncques noted that only 19 per cent of firms said they are considering hiring new staff, and only 14 per cent were looking at opportunities to invest in new technology.

In every region, there were more businesses planning to cut staff than those planning to hire more, it said.

GECS is the largest regular economic survey of accountants around the world. Its main indices are good predictors of GDP growth in themed countries and its daily trend deviations correlate well with the VIX or ‘fear’ index, which measures expected stock price volatility.

Fieldwork for the Q3 2016 GECS took place between September 2 and 19. – TradeArabia News Service